The insurance industry has remained much the same for more than 100 years, but over the past decade it has seen a number of exciting new innovations and new business models.

1. www.pwc.com/us/insurance
March 2016
InsurTech: A golden opportunity for
insurers to innovate

2. 2 top issues
InsurTech: A golden opportunity for
insurers to innovate
The insurance industry has
remained much the same for more
than 100 years, but over the past
decade it has seen a number of
exciting new innovations and new
business models.
Three of the biggest drivers of disruption
include:
• Customer expectations – The
widespread adoption of new consumer
technologies in all industries has
created new needs for and expectations
of insurance solution and interaction
channels.
• Pace of innovation – So far,
incremental innovation has helped
insurers meet most new customer
expectations. But, with the demands
of the shared economy, usage-based
models, internet-of-things (IoT),
autonomous cars, and wearables,
they have an opportunity to do more
radical innovations and experiment
with new business models. In this
context, customers have a need for new
insurance solutions, and established
carriers (i.e., incumbents) have
an opportunity to provide tailored
products and services for different
segments.
• Startups – With easy access to open
source frameworks, scaled cloud
computing and development
On-Demand, technology barriers to
entry have been lowered. New players
that have the ability to innovate
quickly are taking advantage of
the opportunity to fill the gaps that
incumbents have not.
As part of PwC’s Future of Insurance
initiative1
, we’ve interviewed numerous
industry executives and have identified
six key business opportunities (illustrated
below) that incumbents need to take
advantage of as they try to meet customer
needs while improving core insurance
functions.
1 http://www.pwc.com/gx/en/industries/financial-services/insurance/future-of-insurance.html

3. 3 top issues
The promise of InsurTech
Because FinTech offers substantial
promise to take advantage of
emerging opportunities, funding
for startups is surging. Increased
funding activity not only
demonstrates venture capitalist
investors’ interest, but also
indicates how incumbents may
leverage FinTech to address their
specific business challenges.
The insurance-specific branch of FinTech,
InsurTech, is emerging as a game-
changing opportunity for insurers to
innovate, improve the relevance of their
offerings, and grow. InsurTech, has seen
funding in line with FinTech investment
overall, and we expect investments to
increase as new players and investors
enter the space.2
2 DeNovo
Figure 1: DeNovo FinTech companies* - Total Funding
4,000
3,000
2,500
2,000
1,500
1,000
500
2010Q1
2010Q2
2010Q3
2010Q4
2011Q1
2011Q2
2011Q3
2011Q4
2012Q1
2012Q2
2012Q3
2012Q4
2013Q1
2013Q2
2013Q3
2013Q4
2014Q1
2014Q2
2014Q3
2014Q4
2015Q1
2015Q2
2015Q3
2015Q4
Funding($m)
0
Source: PwC Denovo *Selection of relevant companies for Banking Services, Capital Markets, Investment
Services, Insurance, and Transactions and payments Services
3,500

4. 4 top issues
Figure 2: DeNovo InsurTech Companies* Funding Figure 3: DeNovo Early Stage InsurTech Companies* activity
Source: PwC Denovo *Selection of relevant companies for Insurance Intemediaries, PC, Life Insurance
and Reinsurance
2010
Funding($m)
Funding($m)
2011 2012 2013 2014 2015
200
400
600
800
1000
1200
1400
0
Source: PwC Denovo *Selection of relevant companies for Insurance Intemediaries, PC, Life Insurance
and Reinsurance
2010 2011 2012 2013 2014 2015
350
300
250
200
150
100
50
0

5. 5 top issues
Figure 4: Business imperatives Incumbent insurers have
been able to slide by with
incremental improvements.
New entrants are
demonstrating that approach
isn’t enough anymore.
Source: PwC
Customer Market business
environment
Product
Sales and
Marketing
Distribution Underwriting Claims
Customer
Service
Enable the business
with sophisticated
operational
capabilities
Utilize new approaches
to underwrite risk and
predict loss
Leverage existing
data and analytics to
generate risk insights
Meet changing
customer needs with
new offering
Enhance interactions
and build trusted
relationships
Augment existing
capabilities and
reach with strategic
relationships
Business Opportunities – Internal View
Business Opportunities – External View
Incumbent Insurers

6. 6 top issues
As Figures 2 and 3 show, activity around
early-stage InsurTech companies also has
generated considerable buzz. Moreover,
experienced insurance executives have
joined startups, including InsureOn and
Lemonade, to help them develop new
types of products and services, like small
business aggregators and peer-to-peer
insurance models. All of this indicates that
investors and the industry are eager to
get on board with early stage startups in
order to meet the six areas of opportunity
we illustrate above and describe in detail
as follows.
1) Meet changing customer
needs with new offerings
Customer now expect personalized
insurance solutions. One size simply
does not fit all anymore. Usage-based
models are partially addressing these
expectations, but the sharing economy
also is challenging existing, more
traditional insurance products. New
players are able work from a clean
slate and leverage a variety of available
resources to fill market gaps. For example:
• Metromile, a startup, has developed a
customer- (rather than risk-) centric
value proposition for occasional
drivers. It offers a low base rate and
then charges a few cents per mile
driven. Metromile also offers an app
that provides personalized driving,
navigation and diagnostic tips, and
can even remind drivers where they
parked. Furthermore, the company
has entered into a partnership with
Uber that allows drivers to switch from
personal to Uber insurance.
• USAA has invested $24M in Automatic
Labs, a telematics platform that claims
it will “connect your car to your life”
and provides a full suite of integrated
apps (including wearables).
• In the life sector, Sureify has developed
a platform that allows insurers to
underwrite life insurance based on
lifestyle data inputs they obtain from
wearables.
• In the peer-to-peer space, Lemonade
claims to be the world’s first peer-
to-peer carrier, but other companies
like Guevara and InsPeer have been
exploring variations of the same
model. Bought by Many, a startup
that uses social platforms in its go-to-
market strategy, helps individuals join
or even create affinity groups, as well
as find insurance solutions for their
specific needs across different product
lines. Of note, leading Chinese insurer
Ping An has partnered with Bought
by Many to create personalized travel
insurance by leveraging social
media data.
Some large insurers have decided to
develop startups in-house. For example:
• MassMutual is using internal resources
to build Haven, a new, stand-alone,
direct-to-consumer business.
2) Enhance interaction and
build trusted relationships
Established carriers have to manage
increasing customer expectations and
provide seamless service despite their
large and complex organizations. In
contrast, new market entrants are
not burdened with large, entrenched
bureaucracies and typically can more
easily provide a seamless customer
experience – often using not just new
technology but new service concepts.
For example, self-directed robo-advisors
are convenient, 24/7 advisors that
provide ready access to information
that can empower consumer decisions

7. 7 top issues
about financial planning and investment
management. And, investors have taken
notice:
• Northwestern Mutual’s acquired
Learnvest, a leading robo-advisor with
an estimated value of $250+M.
• Other robo-advisors, such as
FutureAdvisor, have been part
of important deals, while others
(including Betterment, Personal
Capital and Wealthfront) have raised
funds above $100M.
Moreover, disintermediation and the
emergence of new online channels is
occurring in all lines of business:
• The Chicago-based startup InsureOn
has created an aggregator that
specializes in micro and small
businesses. It taps into existing profit
pools that personal and commercial
carriers are trying to reach.
• In order to become a B2C player in
the digital small business market,
ACE Group has recently taken a 24
percent ($57.5M) stake in Coverhound,
which enables customers to directly
compare coverage options and pricing
from various carriers.
3) Augment existing
capabilities and reach with
strategic relationships
The insurance industry historically has
included intermediaries, service providers
and reinsurers. In most cases, the carrier
has led the business relationship because
of its retail market position and scale.
However, companies increasingly are
peers. Accordingly, joint ventures and
partnerships are a good way to augment
existing capabilities and establish
symbiotic relationships. For example:
• BIMA Mobile has partnered with
mobile telecoms companies to provide
life insurance solutions to uninsured
segments in less developed countries.
It offers simple life, personal accident,
and hospitalization insurance products
on a pay as you go (PAYG) basis for
a set time period (usually just a few
months). Policyholders can obtain a
pre-paid card and activate and manage
their policy from a mobile phone.
• AXA has acquired an eight percent
stake in Africa Internet Group for
EUR75M, opening new opportunities
for the company in unpenetrated
markets.
New B2B2C entrants also are helping
forge mutually beneficial relationships:
• Zenefits was one of the first to create
new channels to connect insurers,
brokers, employers and employees.
• Flock, which features broker managed
benefits where plans can be designed
to cover a range of options from
enrollment to life events, offers what
it says are “absolutely free” HR and
benefits solutions.
4) Leverage existing data and
analytics to generate risk
insights
Established insurers traditionally have
had the advantage over prospective
newcomers of being able to leverage many
years of detailed risk data. However,
data – and new types of it – now can be
captured in real-time and is available from
external sources. As a result, there are
new market entrants who have the ability
to generate meaningful risk insights in
very specific areas.
• Several internet of things (IoT)
companies, including Mnubo, provide
analytics that generate insights from
sensor-based data and additional
external data sources like telematics
and real-time weather observation.
The promise of the better risk
assessment and management resulting
from this model is likely to appeal to
personal and commercial carriers.

8. 8 top issues
• Facilitating this real-time data
collection are drone startups, including
Airphrame and Airware. Drones
provide the ability to analyze risk with
embedded sensors and image analytics.
They also can operate in remote areas
where it has traditionally been difficult
for humans to tread, thereby saving
time and increasing efficiency. In fact,
American Family’s venture capital
arm is investing in drone technology
in order to explore new approaches to
access and capture risk data.
• In the life space, P4 Medicine
(Predictive Preventive, Personalized
and Participatory) offers insurers
better insights that they can apply
to life and disability underwriting.
Lumiata is offering the potential for
better predictive health capabilities,
while Neurosky is developing next
generation wearable sensors that can
detect ECGs, stress levels, and even
brain waves.
5) Utilize new approaches
to underwriting risk and
predicting loss
Protection-based models are shifting
to more sophisticated preventive
models that facilitate loss mitigation
in all insurance segments. Sensors and
related data analytics can identify unsafe
driving, industrial equipment failure,
impending health problems, and more.
More deterministic models like the ones
that now exist for crop insurance, are
starting to emerge and new entrants are
offering both risk prevention (not just loss
protection) and a more service-oriented
delivery model. For example:
• The South Africa-based company
Discovery has a partnership with
Human Longevity Inc. They are
teaming to offer whole Exome,
whole genome and cancer genome
sequencing, to its clients in South
Africa and the UK. Gene sequencing
can identify risks before they manifest
themselves as problems, but also raises
ethical questions. It has the potential to
completely disrupt life underwriting,
and places certain responsibility on the
company to help customers manage
genetic risks (while being careful about
actually mandating lifestyle choices).
But, on the whole, managing genetic
risks in advance can benefit both the
end-consumer and the insurer because,
if they work together, they can better
manage or even avoid long-term health
problems and associated expenses.
• On the automotive side, Nauto, a San
Francisco- based company, offers a
system that provides visual context and
telematics with actionable information
about driving behavior, including
distracted driving. The company claims
that its system can help insurers design
new pricing strategies and pinpoint
areas of premium leakage that they
otherwise may not notice.

9. 9 top issues
6) Enable the business with
sophisticated operational
capabilities
Effective core systems enable insurers
to operate at a large scale. Because of
cost, establishing these systems has
traditionally been a barrier to market
entry. However, access to cloud-based
core solutions has facilitated scalability
and flexibility. Developments like this,
combined with new developments like
robotics and automation, have provided
new market entrants compelling market
differentiators.
As just one example, underwriting
automation is now available in life and
commercial lines (notably for small and
medium businesses). Some carriers have
adopted simplified processes and “Jet”
underwriting, in which they leverage
external data sources to expedite
approval. This has resulted from the
availability of risk insights that support
new underwriting approaches.
Several companies are offering to
optimize and augment processes via
improved collaboration, artificial
intelligence, and more. For instance:
• OutsideIQ offers artificial intelligence
solutions via an as-a-service
underwriting and claims workbench
that uses big data to address complex
risk-based problems.
• In addition, automating claims can
improve efficiency and also effectively
assess losses. Tyche offers a solution
that uses analytics to help clients
estimate the value of legal claims.

10. 10 top issues
Implications: Think like a disruptor,
act like a startup
In a time when societal changes,
technological developments,
and empowered customers
are changing the nature of the
insurance business, established
insurers need to determine how
InsurTech fits in their strategies.
The table to the right shows the
various approaches insurers are
taking.
More specifically, insurers are:
• Exploring and discovering – Savvy
incumbents are actively monitoring
new trends and innovations. Some of
them are even establishing a presence
in innovation hotspots (e.g., Silicon
Valley) where they can learn about
the latest developments directly and
in real time.
Action Item: Plan an InsurTech
immersion session for senior
management. This should be an
effective eye opener and facilitate
Figure 5: How do insurers deal with FinTech?
Source: 2016 PwC Global FinTech Survey
25%20%15%10%5%0%
We do not deal with FinTech 23%
We engage in joint partnerships with FinTech
companies
20%
We buy and sell services to FinTech companies 16%
We set up venture funds to fund FinTech
companies
10%
We rebrand purchased FinTech services
(white labelling)
9%
We establish start-up programmes to incubate
FinTech companies
7%
We acquire FinTech companies 4%
We launch our own FinTech subsiduaries 4%
Other 4%
Do not know 4%

11. 11 top issues
sharing of relevant insights on desired
InsurTech solutions. Subsequently,
FinTech analyst platforms can keep
management up-to-date on the latest
developments and market entrants.
• Partnering to develop solutions –
Exploration should lead to the
development of potential use cases that
address specific business challenges.
Incumbents can partner with startups
to build pilots to test in the market.
Action Item: Select a few key business
challenges, identify possible solutions,
and find potential partners. A design
environment (“sandbox”) will help
boost creativity and also provide tools
and resources for designing and fast
prototyping potential solutions. This
approach also can help establish the
baseline and approach to building
future InsurTech solutions.
• Contributing to InsurTech’s growth
and development – Venture capital
and incubator programs play an
important role strategically directing
key innovation efforts. Established
insurers can play an active role by
clearly identifying areas of need and
opportunity and encouraging/working
with startups to develop appropriate
solutions.
Action Item: Define a strategy to direct
startups’ focus on specific problems,
especially those that otherwise
might not be addressed in the short
term. Incumbents should consider
startup programs such as incubators,
mechanisms to fund companies, and
strategic acquisitions. (N.B.: It is vitally
important to protect intellectual capital
when imparting industry knowledge to
startups.)
• Developing new products and
services – Being active in InsurTech
can help incumbents discover emerging
coverage needs and risks that require
new insurance products and services.
Accordingly, they can refine – and even
redefine – product portfolio strategy.
This will result in the design of new
risk models tailored to underserved
and emerging markets.
Action Item: Take a close look at
emerging technologies and social
trends that could be business
opportunities in order to define
product strategy, determine required
capabilities, and develop a plan to
build a portfolio and seize market
opportunities.
FinTech has become a buzzword,
but whichever way the FinTech/
InsurTech market itself goes, the reality
underpinning it is not a passing fad.
Insurers that are actively involved with
InsurTech in any of the ways we describe
above stand to gain whichever way
the market moves. They can use their
capital and understanding of customers
and the market to both inspire and
exploit innovative technologies and
correspondingly grow their business.

12. www.pwc.com/us/insurance
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Contacts
Jamie Yoder
US Insurance Advisory Leader
+1 312 298 3462
jamie.yoder@pwc.com
Anand Rao
Innovation Lead, PwC Analytics Group
+1 617 633 8354
anand.s.rao@pwc.com
Javier Baixas
Director, PwC InsurTech Lead
+1 312 206 9699
javier.baixas@pwc.com